Blue Cross Wants to Pay Per Patient in Mass.

Blue Cross and Blue Shield of Massachusetts wants to start paying doctors and hospitals a flat fee per patient per year, the Boston Globe reports. The sum would depend on the age and illnesses of the patient, and there would be big bonuses for progress on measures such as access to the care and control of diabetes and high blood pressure.

The system evokes “capitation,” the per-patient payment systems that had a brief wave of popularity in the 1990s. But Blue Cross says its new plan would protect against problems such as undertreatment and underpayment that sunk capitation the first time around. “We have no interest in returning to the heyday of managed care or denying care,” Blue Cross exec Andrew Dreyfus told the Globe.

The big insurer says it’s bringing back the flat fee in yet another effort to slow the growth of health care spending and create more financial incentives for doctors to focus on patient outcomes.

Big health systems the Globe spoke with said they supported the principles behind the plan, but worried about the impact on revenues, and about being held responsible for care and costs over which they have limited control.

Health-care policy wonks and advocates seemed warm to the plan. John McDonough, who runs Mass.-based Health Care for All, told the paper it was promising. “What we have now is killing us financially, and in some cases medically,” he said.

Comments (5 of 12)

Blue Cross could certainly increase the weight of quality-based reward or penalty without this drastic step.

Most of all, while I agree that consumer responsibility (with sufficient safeguards for high costs) sounds like the right move for the US, so far (and only so far) only systems with central price controls have been relatively successful in restraining cost increases.

10:16 pm March 7, 2008

samuelducanada wrote :

Capitation's effects could depend on how it is used. Funding overall health programmes, for chronically ill patients, by capitation apparently can sometimes make sense. One Australian study - assuming the study was well-constructed and the results can be validated - found that capitation could sometimes work better than DRG as a health resource consumption predictor for such patients, who have longer-term needs, both inpatient and as hospital outpatients, that are not always accurately reflected by a payment system designed for short stays.

Of course, this assumes as well that:
1) the cost is appropriately assessed for each patient group.

3) Economies of scale are sufficient. Smaller hospitals in Victoria, Australia receive fixed budgets for outpatient care, because DRG payments to larger hospitals (although volumes are capped), although
somewhat based on average costs, assume certain economies of scale. Fixed costs per patient are high for smaller hospitals. These hospitals also have a risk of a higher than expected number of patients being more expensive than average, even if they are not cost outliers.

4) This study only pertained to hospital care, as Australian doctors are most often paid fee-for-service (always in an ambulatory setting).

5) The study examined how well costs were predicted in a system using DRG's; capitation was not adopted as a payment method for these patients, so the effects of implementing such a system have not been explored there.

On the same note, in Copenhagen, Denmark, referrals fell when the county switched from capitation of GP's to 1/3 capitation, 2/3 fee-for-service. (Provision of services earning specific fees also went up, which is an issue). Capitation would indeed create an incentive to over-refer to hospitals which themselves would have compelling incentives to discharge patients even earlier.

Stockholm, Sweden also may have had success with a mixed 50/50 capitation/FFS GP payment system (replacing salaries). Some health economists believe that such mixed systems can compensate for prices being set at the wrong level. Mixed capitation and reduced FFS could reduce the risk to providers, as doctors could still earn money from more services, helping to cover additional treatments to high-cost patients. This, of course, would partly block attainment of Blue Cross's main goal, which cannot be attained thus without the problem of risk shifting. Some countries cap losses per patient or cover a majority of losses per patient, such as the Netherlands. In any case,
small practices would still require other arrangements.

8:36 am January 23, 2008

Ira B. wrote :

The problem in this case comes down to physicians acting as insurers, insurers acting as agents, and patients getting the short end of the stick. THe last time this happened, large physician groups made capitation work for them. small doctors who got stuck with a few "outlier" patients got nailed. What makes insurance companies think they are any smarter than they were before. Hello, big business medical groups :(

10:05 pm January 22, 2008

AnonMD wrote :

I think capitation makes sense - just not at the rate these morons will want. Maybe $200 / patient / month. That'd allow a primary care physician to have a reasonable number of patients to manage. He / she could take very good care of a limited population, provide access, etc. Would be great...

1:28 pm January 22, 2008

Steve Schuster wrote :

Health insurance companies have a poor track record in representing covered lives. No consumer shops for cost effective care, their insurance company does it for them. The result is that both consumers and physicians feel they are spending someone else's money when receiving and dispensing care. See http://www.healthcaresoundoff.com. The idea for a no interest credit care for first dollar coverage makes alot of sense. Neither the insurance company nor the physician controls what is spent. This is done by the consumer. This forces insurers to do what they are supposed to do, insure for catastrophic events.